MINNEAPOLIS - Aug. 29, 2001-- Typically, as goes one airline -- whether it's in raising airfares or in reducing travel agency commissions -- so goes every other major carrier. Thus, Carlson Wagonlit Travel Associate Division's Executive Vice President Roger E. Block, CTC, today said that it came as no surprise that once American Airlines announced its intent on August 17 to slash the maximum commissions it paid to travel agencies by sixty percent, most other major U.S. airlines would follow suit. Block announced that many of Carlson Wagonlit Travel's 1,100 United States-based Associate (franchised) agency locations had begun the "difficult process" of restructuring the fees they must charge customers in order to avoid considerable losses.

"This latest move to reduce travel agency commissions was designed to further reduce service and increase fares among travelers, especially among business travelers," stated Block, who noted that very few domestic leisure tickets are sold for more than $400; the new commission caps only impact tickets valued at over $400. Block also warned airlines that according to recent news reports and the experience of many Carlson Wagonlit Travel agencies, "business travelers are going to incredible lengths to bypass the high corporate fares charged by the airlines, often taking advantage of more restricted fares typically used by their leisure counterparts or simply foregoing all but the most critical travel plans."
    
"The airlines believe they can reap greater profits by forcing companies to in turn force each of their individual travelers to use airline call centers and online services, where consumers will only have access to each individual carriers' information, schedules and fares," Block said. In that world, travelers would unwittingly be paying more since they no longer would be able to avail themselves of the unbiased information and travel management routinely provided by ours and other travel agencies."

Block explained that to make up for the sixty percent reduction in commissions paid for corporate-oriented ticket sales, most Carlson Wagonlit Travel Associates have indicated that they must increase the fees it charges its customers. According to a poll of Carlson Wagonlit Travel Associates taken last week, 36% of the respondents indicated that their first action taken after the caps were announced was to adjust their service fees.
    
"Most travel agencies already operate on very narrow margins of profitability," noted Block. "Thus business customers should not be surprised to see the fees they pay for travel agency services increase; in some cases, those fees could increase dramatically."

Block questioned the timing of the commission changes. "At a time when airlines apparently need all the help they can get in order to fill airplane seats, their hidden fare increase will likely make matters worse, especially if business travelers decide that they would rather curtail travel rather than be forced to pay more," explained Block. "One reason why the airlines' have lost millions of dollars this year is because business travel has already been cut back dramatically by so many corporations that are looking for ways to stay in the black during these uncertain economic times. This move will only serve to exacerbate the airlines' slump as business travel will probably decrease further. Rather than helping the airlines' bottom-lines, this commission change could unintentionally have the opposite effect."
    
According to industry reports, travel agencies have effectively served as one of the airlines' most cost-effective, cost-efficient means of distribution, in addition to serving as their de facto customer service representatives.
    
"The sad truth and reality for the airlines is that if they had to absorb all of the consumers who are currently choosing to use travel agents, they would be forced to spend so much more than what travel agency services currently cost them," explained Block.

"That's because even in the Internet age, consumers invariably have questions, problems, concerns and changes that online sites simply aren't equipped to handle. The airlines would need to hire thousands of new workers to man their costly new call centers filled with expensive new technology and telecommunications equipment."
    
Block indicated that while the agencies' need to increase fees will be understood by most corporate clients, "Carlson Wagonlit Travel Associates don't take their decision to alter their fee structures lightly. They have told us that they intend to redouble their commitment toward helping their customers get the best possible experience for their travel dollar," Block added.
    
Carlson Travel Group, Inc., is a subsidiary of Minneapolis-based Carlson Companies, Inc. Brands include: Carlson Wagonlit Travel Associates, Cruise Holidays, Results Travel, First Discount Travel, Travel Professionals International, Travel Agents International, Neiman Marcus Travel Services, Carlson Leisure Fulfillment Services and Carlson Destination Marketing Services. In 2001, for the fifth consecutive year, the Carlson Wagonlit Travel Associate program was named the top travel business franchise by Entrepreneur.